TIF development money has been an important factor in the redevelopment of the city.

Courtesy of Carter Dawson

“They took $5 million out of their TIF funds that are supposed to be used for development, and they used it to patch their budget hole. I think that’s completely illegal,” said State Sen. Bill Seitz, who added that he was “outraged” by the action.

Cincinnati real estate veteran Joe Kramer agrees with Seitz. Kramer is an executive vice president with Henkle Schueler & Associates of Lebanon. But in 2001, he was a Cincinnati Chamber of Commerce executive, lobbying for the legislation that led to Cincinnati’s creation of 20 different TIF districts.

The districts allow cities to freeze property values in an area of up to 300 acres that is considered economically distressed. Property taxes from new real estate value created for 30 years after the district’s creation go into a special fund that can be used to invest in new development projects.

As the Courier reported last week, the districts have enabled $78 million in public investments that triggered more than $285 million in office, hotel and residential developments. Kramer said that’s what authors of the legislation intended. They didn’t foresee the money being used to fund obligations with Cincinnati Public Schools, which receives $5 million a year for tax revenue it lost when riverfront land was acquired for stadium construction. The city has made those payments from general fund revenues in the past. In December, a five-member council majority voted to use TIF district proceeds to make the payments instead.

The $5 million “CPS Payment TIF districts” line item was the largest in a 31-item list of “additions and deletions” to the city manager’s two-year operating budget. The $29.6 million list was attached to a Dec. 29 budget motion signed by council’s four Democrats and Republican Charlie Winburn. The cuts allowed council to close a $54.7 million general fund budget gap without police layoffs and without imposing a new garbage-collection fee.

“All they’re doing is grabbing revenue from any place they could possibly find it,” said Kramer. “It was never envisioned for that when we wrote the legislation.”

City Solicitor John Curp said the use of TIF proceeds for CPS contract payments is a permissible use, based on a legal analysis prepared late last year by the city’s bond counsel, Peck Shaffer & Williams. Curp declined to release the analysis or describe it, citing attorney-client privilege.

“We’re confident in their opinion,” said Curp, who practiced law with Seitz for 13 years while both were partners in the Taft Stettinius & Hollister law firm downtown. Curp said Seitz is “seldom wrong,” but he is convinced that Ohio’s TIF statute “provides for the service payments to be used to pay compensation to school districts.”

The Ohio Department of Development monitors the use of TIF districts. A spokeswoman could not immediately answer whether the CPS payments are permissible.

Seitz considers payments “a classic example of bait and switch” on the part of city officials who lobbied for the districts a decade ago.

“It was pitched to us as a way to pay for the Banks project,” he said. “They’ve diverted money for the park, which is not the Banks, and the trolley, which is not the Banks, and now the school district, which is not the Banks.”

Kim Dewalt, a city accountant who tracks TIF district spending, said it hasn’t been determined which of the city’s 20 districts will provide funding for the CPS payments. They’re likely to be made in two equal installments in April and October, she said. As for money diverted to the Central Riverfront Park and “the trolley,” as Seitz called the city’s $150 million streetcar project, no TIF funds have been spent on either to date, Dewalt said. A bond issue has been authorized by council but the size of the issue and the districts that will cover the debt service payments have not been finally determined, she said.